The accounting deficit of FTSE 350 DB pension schemes fell for the first time since November 2018, Mercer’s latest research has revealed.

Mercer’s Pension Risk Survey found that the overall deficit decreased from £55bn at the end of March to £52bn by the end of April.

Commenting on the findings, Mercer partner, Maria Johannessen, said: “This month’s modest improvement in the funded status is welcomed after a period of sustained increase in the FTSE 350 pension deficit.

“There continues to be a significant gap to bridge before schemes return to surplus. This combined with the volatility on the horizon means that corporates should consider locking in gains and manage risk.”

Liabilities fell by £2bn to £845bn and asset values increased by £1bn to £793bn.

The decline in liabilities was driven by a 0.1 per cent increase in corporate bond yields, although this was partially offset by an increase in market implied inflation.

Mercer actuary, Charles Cowling, added: “At a time of considerable political turmoil and Brexit uncertainty, it is surprising that markets have remained relatively calm.

“The Bank of England has indicated that the next change in interest rates could be in either direction, depending on the outcome of Brexit.

“A no-deal Brexit could lead to the double whammy of a reduction in interest rates at the same time as a fall in sterling, leading to higher inflation.

“This could send pension deficits back towards previous highs. Trustees need to remain vigilant and take advantage of current positive conditions by looking for opportunities to de-risk.”

Mercer’s data relates to about 50 per cent of all UK pension scheme liabilities and analyses pension deficits calculated using the approach companies have to adopt for their corporate accounts.

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